Rising input costs, interest on borrowings drag Notore to N950m loss

Notore Chemicals, a fertiliser and agro-allied company have recorded a loss of N949.6 million in the nine-month period (9M’2022) compared to a loss of N15.85 billion in the same period of 2021.

Analysis of the nine-month financial result available on the Nigerian Exchange Group showed that rising input costs and interest on borrowings were the masterminds behind the loss reported during the period.

The chemical producer’s revenue hit a record high in the nine months period of 2022 due to limited global supplies of fertiliser, which has led to an increase in fertilizer prices.

With export sales contributing 53 percent of the total revenue generated, revenue grew by 249 percent to N32.95 billion in the nine-month period that ended in September 2022 (9M’2022) from N9.43 billion in the corresponding period of 2021.

Further analysis of the nine months’ financial results shows that the 385 percent boost in the sale of urea was the major driver for the growth in revenue as urea grew to N29.4 billion in 9M’2022 from N6.07 billion in 9M’2021. NPK grew by 14.5 percent to N2.6 billion in 9M’2022 from N2.27 billion in 9M’2021.

However, Notore’s input costs claimed 70.08 percent of its total revenue bringing its gross profit to N9.86 billion in 9M’2022 from N5.82 billion in 9M’2021.

Its cost of sales in the nine-month period that ended in September 2022 grew by 51.31 percent to N23.09 billion from N15.26 billion in the same period last year.

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After administrative expenses totaling N5.18 billion and selling and distribution expenses of N162 million in 9M’2022, the firm received money from the fair value adjustments on its investment property, grant income, and others, therefore bringing other incomes to N7.54 billion in 9M’2022 from N7.08 billion in 9M’2021.

However, finance costs reported by the firm amounted to N13.01 billion in the nine months period that ended in September 2022 from N12.54 billion in the corresponding period of 2021.

Its financial statement revealed that interest on borrowings was the major driver of the increase in finance costs as it increased to N12.99 billion in 9M’2022 from N12.53 billion in 9M’2021.

Notore’s total assets increased by 10.20 percent to N240.09 billion in 9M’2022 from N228.04 billion in 9M’2021, while its total shareholder’s fund increased by 10.20 percent to N52.08 billion in 9M’2022 from N47.26 billion in 9M’2021.

Cash and cash equivalents for the period under review were negative amounting to N1.1 billion in 9M’2022, up from N-1.82 billion in 9M’2021.

According to the movement of its cash and cash equivalents, the firm’s net cash flow from operations was positive, amounting to N13.6 billion, indicating that the firm is generating enough cash from its operations.

However, net cash flow from operations declined by 16.15 percent from N16.22 billion in 9M’2021.

Cash flow from investing activities was negative totaling N2.73 billion, largely due to the purchase of property, plants, and equipment, and additions to right of use and intangible assets made during 9M’2022.

Cash flow from financing activities was also negative, totaling N9.71 billion in 9M’2022 from N-3.01 billion in 9M’2021, largely due to interest paid, additions to lease liability and repayment of borrowings made during the period.

Notore Chemicals declared earnings per share of N-0.59 per share in September 2022.

Notore Chemical Industries Plc (Notore) is one of the leading fertiliser and agro-allied companies in Africa. Their principal activities include the supply of premium fertilisers, appropriate education on best practices for farming, and proper deployment of these practices for optimum results.